ICAC identifies ways to minimise corruption in IT contracts

Wednesday 21 August 2013

The NSW Independent Commission Against Corruption (ICAC) has identified five key levers that need to be managed in order for government agencies to minimise the corruption risks involved in managing information technology (IT) contractors.

In a paper released today, Managing IT contractors, improving IT outcomes, the ICAC canvasses the unique pitfalls that public sector managers who do not possess IT knowledge and expertise may face when dealing with contractors engaged to undertake specialist IT work for government agencies.

"For public sector managers, the oversight of IT projects and engagement of IT contractors is fraught with risks of delays, cost blowouts and failure to achieve project goals," the paper says. "The rapidly evolving IT field renders impractical many attempts to directly manage the technical aspects of IT projects – a problem heightened for managers with core expertise that is remote from IT."

After consulting chief executives, operations managers, IT managers and auditors from a diverse range of public and private sector organisations in Australia about how they control IT contractors, the Commission found that while they may differ on the specific steps they take, all of their approaches to contractor management are aimed at effective management of the following five key levers:

• linking of business case to project controls• separating design and build• guarding the "gateway" through which contractors enter the organisation• managing the project management• ensuring a clear exit strategy is in place.

The paper notes that decades of disruptive technological shifts and constant innovation have led to unrelenting change in organisations being driven by an area that is outside the expertise of most operational managers. This disruptive innovation also affects the IT industry, resulting over an extended period of time in the perpetuation of a somewhat immature industry structure with many micro firms. Some 20,000 IT firms exist in Australia, with 85% having fewer than five employees and only 500 firms having more than 20 staff.

There are also over 2,000 specialist IT recruitment firms, some of which are owned by the contractors themselves. Government needs for specialist IT assistance for a one-off project, though, mean that it is often inappropriate to consider IT specialists for permanent positions. Nor do specialists in cutting-edge technologies want to work in an environment where they are paid less and lose skills. Rather, specialists work in association with other micro firms, forming industry networks and associations, as needed.

The resultant heavy reliance on contract IT specialists to design and implement highly innovative projects means that traditional methods of project control such as budget, specifications, timeframe, cost and measurement of deliverables become elastic and are rendered less effective. As these controls weaken, the ICAC has seen opportunities for profiteering and corruption increase; contractors can over-service, over-price and under-deliver.

The paper's aim is to provide insight into the diverse range of strategies used by organisations to minimise corruption and opportunistic behaviour while achieving their IT goals, rather than providing a "how to" approach or set of guidelines for all agencies.